Setting prices for your services can be one of your most difficult tasks as a new business owner. Inexperience may tempt you to lowball prices to attract new clients, but this can backfire for a variety of reasons. If you price your business out of the market, you won't stay in business long. Pricing painting and decorating jobs can be particularly difficult because each job will differ in size and complexity. By understanding how to get started in assessing operating costs, and paying yourself a liveable wage, you can develop a plan for pricing your new services.
Research your competition. Look for businesses of a similar size in your target market to get an idea how much they charge, suggests the Freelance Directory. Larger businesses often have access to cheaper supplies via wholesalers and bulk purchasing, and may also pay much lower insurance and tax rates. Don't try to compete with them by lowering your prices. Focus on small painting and design businesses that target your customer demographic, such as customers looking for a more personalised experience, and look at their prices. Develop an overview of what price ranges your market will bear.
Assess your operating expenses. While some costs, such as paint, trim and flooring are obvious, it's important to include less tangible expenses. For example, your painting and decorating business will need insurance to protect you in case you do accidental damage to the client's property, and to cover you in case of an injury on the job. Make a detailed list of every cost associated with running your business to ensure an accurate understanding of your overhead. Don't forget to include fuel costs to drive to the job site, replacement costs for equipment, expenses for printing business cards or even the cost of postage to send invoices.
Determine an hourly wage to pay yourself while working. Multiply what you'd consider to be a reasonable hourly wage for your services as an employee 2.5 to 3 times, suggests Giaom.com. This will help cover higher taxes, legal expenses, accounting costs and other expenses usually covered by your employer. Include the cost of downtime in your hourly wage. Just as an employer charges customers more to continue paying employees and expenses during slow times, you need to charge enough to keep your business running in between clients.
Create a system for estimating the cost of each job. Your customers will want some idea of how much you charge before they hire you. Figure out how much your supplies cost for each square foot you paint, finish, carpet or trim, including intangibles such as equipment replacement and fuel costs. Estimate how many minutes per square foot each task takes to complete. Calculate how much it should cost per square foot for every supply, combined with your hourly wage, so that you have a basic fee you can offer according to the size and complexity of each job.
Consider customer psychology when pricing your services. Don't compromise your work by accepting an extremely low wage. Even bargain shoppers expect high quality to cost; they may doubt your abilities if your prices are too low.
Tips and warnings
- Consider customer psychology when pricing your services. Don't compromise your work by accepting an extremely low wage. Even bargain shoppers expect high quality to cost; they may doubt your abilities if your prices are too low.